Free money, forever

More and more countries are experimenting with basic income – a monthly salary from the government with no questions asked. But does it destroy the financial incentive needed to get people off the sofa and into a job?

You used to be able to trust left-wing parties to defend welfare and right-wing parties to attack it. But in Denmark, governments on both sides of the aisle have taken to reforming welfare and benefits as a matter of course. The focus has been on reducing unemployment and reining in government spending. In the process, the unemployed have gotten less and less.

But is the current system the best way to deal with unemployment? Is it possible to have a safety net that isn’t constantly threatened with cuts – one that is both generous and empowering?

One popular proposal is basic income, in which all citizens receive a no-strings-attached sum of money each month, regardless of income and employment status.

The idea is gaining traction across Europe, and Finland looks set to give all citizens €800 (5950 kroner) per month next year. A pilot programme has been introduced in Utrecht, the Netherlands, while Switzerland voted to introduce a basic income programme in June – the referendum failed.

Unemployment myths
In Denmark, the idea is championed by political party The Alternative (Alternativet), which sees it is a viable alternative to the least generous unemployment benefit, kontanthjælp.  Kontanthjælp recipients must be available to the labour market at all times, have personal assets worth no more than 10,000 kroner, and may not earn any other income. But the Alternative would rather give them the money without conditions.

“There exists this myth in Denmark at the moment that holds that unemployed people are unemployed simply because they don’t want to work,” says Alternativet MP Torsten Gejl, who argues that people receiving unemployment benefits ought to spend their time developing their skills and taking care of their needs, rather than chasing non-existent jobs.

“Nothing bad will happen if we stop forcing people to find work that isn’t there. I think that once we can demonstrate that this system actually encourages people to become more qualified and closer to the workforce, the barriers to introducing a basic income will be removed. This would be a much better system than thinking we will achieve full employment tomorrow. Full employment is a situation that occurs every 50 years. And at the moment, there is far more unemployment than there are jobs available.”

In recent years, the government has reduced the value of kontanthjælp in order to increase the incentive to find work. Other bureaucratic demands are designed to make being a recipient of unemployment benefits as burdensome as possible. So without these incentives, would people still try and find work, especially those without language skills or qualifications recognised by the labour market, such as refugees?

According to Gejl, Alternativet wants to try basic income for kontanthjælp recipients first, before rolling it out to the rest of society.

“We haven’t discussed in detail if this policy would be the best way to meet immigrants who have fled another country. I think we must be very active to make sure that immigrants become a part of the workforce,” says Gejl, adding that he hopes the proposal will be implemented as quickly as possible.

“Let us first demonstrate that replacing benefits such as kontanthjælp with basic income works. Then we can get together again and talk about basic income for everyone.”

Not so revolutionary
In Denmark, the idea of a basic wage was first introduced in the 1978 book Oprør fra midten (Revolt from the middle), which argued for a more equitable society, though researcher Anita Ulrich points out that the Alternative’s proposal is a far cry from its original incarnation.

“While a citizen’s wage in Oprør fra midten is part of a vision for a future society defined by solidarity and social justice, the basic wage presented by Alternativet has been reduced to a fine-tuning of a system we already know and where society, after it has been introduced, retains its inherent social injustices,” writes Ulrich in Information newspaper.

Revolutionary or not, basic income is gaining traction in modern societies, where robots and outsourcing are signs of the slow death of unskilled labour, and where neo-liberal and austerity politics have become the status quo.

The primary benefit of the basic income is that, unlike unemployment benefits, it doesn’t stop recipients from working, argues Otto Brøns-Petersen, head of analysis at liberal think tank Cepos. For those in work, the incentive is reversed, however, as they can lower their working hours and earn the same as they did before the introduction of the basic income.

“If we introduced a basic income today, some people who aren’t working today would start working, while some people who are working would work less,” Brøns-Petersen wrote on free market blog Punditokraterne. “The effect isn’t clear.”

A moral issue
Understanding the impact of introducing a basic income is complicated, and requires integrating both the immediate financial cost of the programme with the change in behaviour it would cause. If its implementation raises taxes on those in work, for example, it could decrease productivity and reduce tax receipts further.

On the other hand, a basic income could increase the number in work and paying taxes. And some studies have shown that a basic income does not demotivate people. Instead, it frees them from worrying about fundamental insecurities such as paying for their basic needs. 

Associate professor Jørn Loftager, from the department of political science at Aarhus University, doesn’t rule out the possibility of a basic wage in Denmark. The vast majority of Danes are employed, so there are few who would join the scheme without any previous income whatsoever. In that sense, introducing basic income in Denmark would be comparatively easier than in other countries, notably those where women make up a much smaller percentage of the total workforce.

Loftager outlines two different models. One is to guarantee everyone a certain amount of income and pay each citizen that amount. The other is to integrate a basic income into the tax system through a negative income tax. Someone with no income would be owed the negative sum by the state, while those in work would begin to pay taxes when the income tax he or she should be paying is greater than the negative income tax.

What the two models have in common is that everyone is guaranteed an income, it’s just the financing that differs. In the first, the challenge is how to recoup the enormous sums of money paid out to citizens. Will having a secure income increase productivity? We don’t know.

Loftager argues that there is evidence that a basic income would not demotivate workers. He points to a study of a Belgian lottery in which winners are paid out in monthly instalments rather than a lump sum. The study indicated that people with a comfortable income are not inclined to stop working, even though they could. He also argues that research into people’s motivation to work also suggests that there are many more factors at play than money, including a strengthened sense of personal identity and participating in social life with colleagues.

Still, money is generally held to be the primary motivator for work and most political parties argue that there should be a noticeable payoff for going to work rather than being on unemployment benefits. This is the central moral question in the debate – those who can work, should.

“People are against the idea that others should be allowed to enjoy something without effort,” says Loftager. “It is like a categorical resistance that says: this is simply wrong, regardless what positive effects it could bring about.”

Loftager points out that in the early 1990s, Denmark had a very generous unemployment benefits system with almost indefinite access and with the opportunity to take lengthy periods of paid leave. A lot has changed since, with massive cuts to both the value of unemployment benefits and the length of time they can be claimed.

It remains uncertain, however, whether these cuts have actually encouraged people to seek work rather than remain unemployed. With some groups remaining difficult to move into employment, perhaps a new approach is needed, argues Loftager.

“Basic income is not at all alien to the flexicurity provisions in Denmark that are in place to prevent people from going under in times of trouble and to keep them professionally qualified so that they can get back to work again,” he says.”

“Rather than keep delivering more of the same medicine, it would be interesting to experiment with something else.” M

Features, News

By Stubbe Wissing

Facebook comments